8.37am: It's the last prime minister's questions of 2010 and, because MPs behave much the same as people in any other workplace, they may be feeling a bit demob happy at midday. If so, it might be the only light relief we get today. There's a lot on the agenda today, and most of it is serious, heavy-duty politics. Here's a list.

3.30pm: David Miliband and Sir Malcolm Rifkind give evidence to a committee about the role of the Foreign Office in government.

As usual, I'll be coving all the breaking political news, as well as looking at the papers and bringing you the best politics from the web.

9.00am: Andrew Lansley, the health secretary, has been giving interviews about his NHS reform plans this morning. According to PoliticsHome, he told BBC News that he was going to phase out mixed-sex wards.

The operating framework for next year for the NHS will set out very clearly [that] our expectation is that all hospitals across the country should declare that they are now compliant with the criteria for only putting patients into single sex accommodation except where there is an emergency reason … Where they breach those rules, we're not going to pay hospitals for providing a sub-standard service.

9.31am: David Cameron is due to address a meeting of the Conservative backbench 1922 committee this evening. He will find that some of his MPs aren't happy about the coalition.

At the weekend David Davis in an interview said that he had been shocked by the "sheer degree of hostility" there was towards the coalition leadership among backbenchers.

[There is] a feeling that they have been taken for granted, a feeling that the Liberal Democrats are allowed to say what they like and do what they like. All the Liberal Democrats are being cosseted while they decide whether to abstain or to vote against or vote for [tuition fees], while the Tories are being told: "Right, you don't vote for this, your career is over," or: "You vote for this, you have got to resign as a PPS [parliamentary private secretary]."

And this morning two more backbenchers, Nadine Dorries and Peter Bone, spoke out in interviews on the Today programme.

Dorries said she was worried by the number of people saying that the coalition should continue beyond 2015.

Some of us feel very much as though too much has been given away to a few people to achieve too little. There is an emerging trend in the party where people appear to have been strategically placed to talk about the idea of going forward into the next election as a coalition. You see that happening from some of the 2010 intake – Nick Boles writing his book – and from John Major.

That's almost strategic – someone new, someone old – and some of us are unhappy about this. We are not idiots, we know what's happening and we don't want that because there are Conservative issues that we see being subsumed by the coalition …

It wouldn't be wise for anyone to take Conservative backbenchers for granted in the way that they have been. We have mainstream, core Conservative principles that for the good of the coalition and the country we are suppressing, but it wouldn't be wise to think that that's a position that we want to continue with in the long term.

Bone said he did not even want the coalition to last until 2015.

I accept we need a coalition government until the economic crisis is over and we have dealt with it, but that might be done within the next two years. Then I see no point in the coalition government at all.

9.51am: The latest unemployment figures are out. Here are the top lines from the Press Association news agency:

The government was given some grim pre-Christmas news on jobs today when unemployment increased by 35,000 and the number of young people out of work reached near-record levels.

The jobless total climbed to 2.5 million in the quarter to October, a rate of 7.9%, the highest since the start of the year.

There were 839,000 people unemployed for more than a year, up by 41,000 over the three months and the worst figure since 1997.

The Office for National Statistics also reported that the number of 16-to-24-year-olds out of work increased by 28,000 to 943,000, one of the highest figures since records began in 1992, giving a jobless rate of 19.8%.

The number of people working part-time because they could not find a full-time job increased by 46,000 to 1.16 million, a record high.

The number of people claiming jobseeker's allowance fell by 1,200 last month to 1.46 million, although the number claiming for up to six months rose by 11,600 to 954,900.There were 158,000 redundancies in the latest quarter, up by 15,000, the first rise since April.

Employment fell by 33,000 to 29.13 million, giving the first quarterly fall in the rate since April – down by 0.1% to 70.6%.

It is very uncertain that this approach – particularly the wholesale nature of it – will make commissioning more effective in the short, medium or long term, over alternatives … The wholesale reorganisation of commissioning could derail the potentially positive impact of other aspects of the white paper.

10.11am: You can read all today's Guardian politics stories here. And all the politics stories filed yesterday, including some in today's paper, are here.

As for the rest of the papers, here are three articles I found particularly interesting:

• David Robertson and Deborah Haynes in the Times (paywall) quote a "senior insider" who says the Ministry of Defence and defence contractors are involved in a conspiracy to lie about the cost of defence projects to get them approved by the Treasury.

Speaking on condition of anonymity, one of the country's leading businessmen – a man who has signed deals with the MoD worth hundreds of millions of pounds – laid bare the "game" being played by some of the country's largest companies.

It is a conspiracy that is contributing to a £38bn funding shortfall at the MoD over the next decade, which is likely to mean that equipment for British troops is cancelled.

"The biggest game that gets played by the MoD is lying to the Treasury about the potential costs of a new programme," the industrialist said.

"We [the defence industry and MoD] both know that if we can get a project started, it will rarely be cancelled. That means everybody is very keen to get a project through main gate [the final point of approval] because it gives it momentum and cannot be stopped."

• Daniel Finkelstein in the Times (paywall) says that if the Lib Dems get the credit for all the coalition's "progressive" policies, that will create a problem for David Cameron.

As one modernising minister put it to me: "The narrative might easily develop that anything progressive comes from the Lib Dems, and that is very dangerous to us" ...

To help Nick Clegg it is necessary to give him credit for policy successes, but in order to thrive electorally it is necessary for Tories to be credited with progressive measures. The government needs the Liberal Democrats to complete the task they have begun and to consolidate on the centre ground, rather than see themselves as a leftwing party, but electorally this will make things more awkward for Conservatives. In the end, the Tories can choose between being in coalition with the Lib Dems or just in coalition with their voters.

The former prime minister was forced to watch a scathing parody of Britishness including a QVC-style section in which items ironically commemorating the student fees riots were sold off ...

When Mr Brown finally made it on stage he was derided by the Daily Show host Jon Stewart for being a "socialist" and told to "run off to whatever Commie meeting you're going to".

(I can't find the full video on YouTube, but this edited clip will give you a sense of what the interview was like.)

10.23am: Kenneth Clarke, the justice secretary, is giving evidence to the Commons justice committee now. You can watch it here. Yesterday Michael Howard, the former Tory leader, said that Clarke's plans for sentencing reform were "fatally flawed" and Theresa May told a Commons committee that "prison works". This was seen as an attempt to distance herself from Clarke's approach, although she did not say anything critical about his actual plans. Clarke's policies are unpopular with the Tory right and the Sun is campaigning hard against them. Today it is carrying an editorial calling him "potty". Clarke almost certainly thinks much the same about the Sun. Potentially this session could get quite lively.

10.31am: Clarke is talking about his plans to cut legal aid. The government is cutting legal aid for family cases, unless they involve domestic violence. Clarke acknowledges that his department may have to come up with a proper definition of domestic violence. Some people argue that it does not have to involved physical violence, he points out.

10.43am: Clarke says the cost of judicial review cases has "exploded". But he says that he is in favour of the judicial review process being available. Citizens should be protected from "arbitrary decision making" but the state. Under his plans, legal aid will still be available for judicial review cases. He says that this is because it is hard to see a fair way of restricting this.

Clarke says the first purpose of legal aid "is not to keep up the numbers of the legal profession".

He also says that the Citizens' Advice Bureau will lose some money as a result of his reforms. But the Department for Business gives more money to CAB offices than the ministry of justice, he says.

10.51am: Ken Clarke says he would like to explore the idea of promoting "before-the-event" legal insurance with the insurance industry (policies that will pay future legal fees). But he says that he does not expect there to be a wide take-up, and that he does not envisage before-the-event insurance replacing "no win, no fee" as a mechanism for giving people access to justice.

It isn't hard to understand why the sudden disappearance of Ken Clarke must feature near the top of David Cameron's Christmas wish-list. Assuming Santa fails to oblige by dropping a cluster bomb down a Nottingham chimney, whether the PM treats himself to that gift in the new year sales – there is talk of a mini-reshuffle in January – will offer a useful hint about his chances of developing into a good prime minister.

Will he frank [sic] the New Labour form by succumbing to tabloid pressure at every turn, or does he have the gumption to sit out a passing tornado? So far as the crude power struggle at the heart of his regime, is the string-'em-up populism of media supremo Andy Coulson a stronger influence than the progressive leanings of chief strategist Steve Hilton? ...

Ken Clarke is the very last politician to be blown around by political winds, yet he is cast against type as a weather vane. By keeping him, Mr Cameron would make the statement of intent that he would rather tolerate dissent from senior ministers than be bullied by the forces of reaction. By sacking him, he would look weak and pliable in pursuit of looking strong and resolute, and ridicule his commitment to being what the Americans call an agent of change.

11.01am: The Ministry of Justice made a big announcement about court closures yesterday and Elizabeth Truss, a Conservative, is asking about the closure of a court in Norfolk. Clarke says courts are not like pubs. Many people never visit a court in their life. And, if they do go, they often find them uncomfortable places.

Elfyn Llwyd of Plaid Cyrmu suggests that people will be more reluctant to serve as magistrates if courts close and they have to travel further to sit in a court. Clarke says he hopes this will not be the case.

11.07am: The committee is now asking about sentencing. It might start to get more interesting.

Clarke says that he is working with Andrew Lansley to ensure that services are available for offenders with mental health problems. This is a priority, he says.

It is widely accepted that we have too many people in prison suffering from mental illness.

11.16am: Sir Alan Beith, the committee chairman, says Clarke is having a "tough time" with these plans. Does have have cross-cabinet support?

Clarke says he has never implemented a popular policy in his life. But he does have particular support for these plans. "There is no dissent," he says. All his proposals have been "cleared". This is "a collective approach".

The main thrust of the policy has not attracted any resistance. He wants to tackle reoffending. People agree with this. "I'm not aware that there is any great criticism of this," he says.

Of course there is criticism of some aspects of his plans. But it does not come from within the government.

An MP asks if Clarke will say that "prison works".

He says prison does give the public relief from offenders. He says that he read press reports today suggesting that Theresa May had contradicted him. (See 10.23am.) But May did not say anything contradicting his approach.

There is no disagreement in government on the key policy, he says.

11.18am: Clarke is still talking about sentencing. He says that when he announced his plans in the Commons, most MPs supported them. The opposition has just come from "sections of the press".

He says he has never advocated abandoning short-term prison sentences.

11.30am: Here's the full quote from Clarke in response to the "prison works" question. He was asked if he agrees that "prison works often", even though it is not the total answer to rehabilitation. He replied:

Prison works as a place for sentencing people. It saves people from crime whilst they are inside. Where it is failing is that … too many people released from prison are reoffending. That has been my mantra all the way through. When I heard this morning that the home secretary had apparently disagreed with me, I looked at what she had said and she said exactly the same thing.

Clarke says that he does not expect to be able to stop all prisoners from reoffending. Getting the reoffending rate down from 50% to 40% would be "quite challenging", he says. That would bring "considerable public benefit". But it would still leave 40% of prisoners going back to crime. These people are "villains", he says. They need to be keep being sent to prison.

11.46am: Ben Gummer, a Conservative, asks about the impact of health and safety and the Human Rights Act in jail.

Clarke says he does not know anyone who is not in favour of health and safety or human rights. But it tends to be "officialdom" that over-interprets these rules. It is important to ensure that these words are not "debased by being applied to ridiculous claims by ridiculous people".

As for Mr Gunn, I think his name is, a serious local criminal from my part of the world, he's quite good at getting himself publicity. What he's called doesn't seem to be a matter of huge importance. If he wanted to be called by his christian name, which I think is Colin, no doubt the press would have objected to such friendly greetings and preferred him to be called Mr Gunn. Mr Gunn and his media advisers seem to regard the matter as one of huge importance. He's not a person I hold in very high regard myself and I'm very glad he's in Belmarsh.

11.57am: PMQs is coming up soon. Ed Miliband is not short of questions to ask. He could try:

David Cameron says that per-pupil funding in Lewisham (Alexander's constituency) will be maintained at a level that makes it the 10th highest in the country.

12.02pm: Mark Reckless, a Conservative, says the Germans want to offer the Irish a punitive interest rate. Will the UK help Ireland?

Cameron says that Britain is out of the the economic danger zone.

12.06pm: Ed Miliband starts by paying tribute, it being the end of the year, to all the work done by members of the armed forces in Afghanistan.

Then he asks about unemployment. Won't people be concerned?

Cameron says everyone will be concerned about the rise in unemployment. The government's forthcoming "work programme" will be the biggest back-to-work initiative in history.

Milband suggests Cameron is painting himself as "an innocent bystander". He should not be pressing ahead with a rise in VAT and cuts worth £20bn.

Will Cameron confirm that he is breaking his promise to increase health spending in real terms every year?

Cameron says complacency is having no answers. Exports, manufacturing and retail sales are up. "Let's not talk down the performance of our economy," he says.

The NHS budget will increase by £10bn during this parliament. Only one party was committed to NHS increases at the election.

12.09pm: Miliband says the health committee's report on Monday said the government's commitment to real-terms increases would not be met.

Cameron says he is not breaking a promise. NHS spending will increase in real terms every year. Labour are "committed to cutting the NHS".

Miliband says Cameron is good at the broad brush and good at the air brush. But he should read the report. It says NHS spending will be cut in real terms.

He says experts have criticised the NHS reforms. Isn't it true that on the NHS "you can't trust the Tories"?

In response to Miliband's brush joke, Cameron says sometimes he feels he is up against Basil Brush. He denies that he is reorganising the NHS. He is getting rid of bureaucracy, he says.

12.13pm: Miliband asks about education maintenance allowance. Why doesn't Cameron go to Southwark College and talk to students? Miliband quotes from a letter he has received about the effects of the EMA cut.

Cameron says Miliband wants to talk pantomime (a reference to a joke Miliband made). In fact, the Labour leader should look behind him. Miliband has not got any suggestions.

Cameron says Labour started the year with a leader who dithered and had no ideas on the economy. At the end of the year Labour is in the same position. In Labour terms, that passes for progress, he says.

12.19pm:Snap verdict: Ed Miliband concluded with a bravura flourish that stole the show. David Cameron was adept at insults, but he was unusually weak on policy and his failure to engage with the question about the EMA looked very poor.

12.21pm: Asked about Royal Mail, Cameron says he wants to get private money into Royal Mail to make it better. He points out that Miliband is shaking his head. But Labour also wanted to get private money into the company.

12.22pm: Labour's Ronnie Campbell condemns the tuition fees increase and asks about suggestions that George Osborne is building up a war chest for the election.

On fees, Cameron quotes from the Institute for Fiscal Studies verdict on the government's plans. The IFS said they were more progressive than the status quo, he says.

12.22pm: On the NHS reforms, Cameron says he wants to reduce the amount of bureaucracy in the service.

12.25pm: Labour's Chris Ruane asks if the Lib Dems will move the writ for the Oldham East and Saddleworth byelection tomorrow, for a poll on 13 January. He suggests it is wrong to have an election campaign over Christmas. The voters deserve a "politician-free" Christmas.

12.30pm: On high-speed rail, Cameron says a proper consultation is under way. But he does believe high-speed rail will bring the north and the south closer together.

12.31pm: Labour's Alison McGovern asks about the abolition of EMA. Cameron says that a study commissioned by Labour showed that 90% of students who receive the EMA would stay on at school anyway. The government will replace it with something more effective, he says.

12.45pm:Verdict: Without having looked at the NHS budget figures, or read the select committee report, it's hard at this point to adjudicate as to who was right in the Cameron/Miliband row over whether or not NHS spending is going up in real terms every year. But Miliband certainly seemed to push Cameron on to the back foot on policy. He might have done better to focus on just one issue, instead of rattling through an entire news list, but his final "promise – broken" riff was highly effective (even if getting the backbenchers to join in meant that it was pure pantomime too, despite the fact that Miliband described Nick Clegg as being "the back end of a pantomime horse"). Insults are important at PMQs – it's not a Socratic debating forum – and Cameron is good at them. But today he seemed too eager to throw the punches, and less willing than he should have been to tackle the policy questions.

1.36pm: Here's a lunchtime summary.

• Ed Miliband has accused the prime minister of complacency following the publication of figures showing that unemployment has risen back above the 2.5 million mark. "For all those families around the country, do you understand that your confidence that Britain is out of the danger zone will seem very hollow?" Miliband asked David Cameron at PMQs. Cameron insisted he was taking steps to increase employment. "I'm not the slightest bit complacent about what we need to do but let's not talk down the performance of our economy," Cameron said. As the Guardian reports, the number of people out of work in Britain rose by 35,000 in the three months to October, pushing the unemployment total up to 2,502,000. This raised the UK's unemployment rate to 7.9% (from 7.8% in the previous quarter), the highest rate in six months.

• Cameron has denied breaking a promise to increase NHS spending in real terms every year. Miliband told him at PMQs that a select committee chaired by the Tory former health secretary Stephen Dorrell said in a report this week that the government's commitment to a real-terms increase in health funding would not be met because of higher inflation. Cameron categorically denied this. "We are not breaking that promise. We want to see NHS spending increase by more than inflation every year," Cameron said. The row erupted as Andrew Lansley, the health secretary, outlined the next steps in his plans to reform the NHS and put GPs in charge of the £89bn commissioning budget.

• The National Audit Office has refused to approve expenses claims worth more than £10m submitted by MPs. The NAO was asked for the first time to carry out a full audit of claims submitted by MPs before the new rules came into force. In a report it said the parliamentary authorities could not find evidence to support payments worth £2.6m in 2009-10. In relation to claims worth £1.8m, that was because they were submitted by MPs now being investigated by the police and therefore the auditors did not have access to the paperwork. Claims worth another £800,000 could not be approved because the paperwork was not available, "despite a major exercise to obtain evidence retrospectively". The NAO also found that there was not sufficient evidence to show that claims worth £11.3m were submitted in relation to parliamentary purposes, even though these payments were made in accordance with the rules at the time.

• Vince Cable, the business secretary, has announced plans to end the so-called "gold-plating" of European regulations when they are incorporated into UK law.Announcing a new approach to the implementation of EU directives, he said: "This move will bring an end to the charge of 'gold-plating'. The way we implement our EU obligations must foster, not hinder, UK growth by helping British businesses compete with their European neighbours."

• Boris Johnson has been told that he will face no censure for his failure to disclose his relationship with unpaid City Hall adviser Helen Macintyre prior to her appointment.As my colleague Hélène Mulholland reports, the assessment subcommittee of the Greater London authority said the mayor had committed a "minor technical breach of the code of conduct" and that it was "an oversight".

2.02pm: The Commons authorities think they will have to write off more than £17,000 that should be repaid by former MPs who made questionable expenses claims, today's report from the National Audit Office says. I've already summarised the key findings (see 1.36pm) but now I've had a chance to read the full report. The NAO said it could not approve claims worth £800,000 in 2009-10 because the paperwork was not available to justify them. The Commons authorities decided that, in cases where the proper paperwork was not available, MPs should be asked to repay money if there is also direct evidence that wrong payments were made or if the MPs are unable to provide "alternative evidence" that the payment was justified.

The NAO said that, of the £800,000, claims worth £33,794 came into this category. In other words, MPs will be asked to repay a total of that amount. But the NAO also said the Commons authorities should not expect to receive "payments of £17,612 [out of the £33,794] to former members where management consider that recovery action is unlikely to be successful".

2.15pm: The Commons members' estimate committee, the body that used to be in charge of MPs' expenses until the Independent Parliamentary Standards Authority took over, has issued a lengthy statement about the National Audit Office report about expenses. (See 1.36pm and 2.02pm.) It makes various points in defence of the Commons. Here they are:

• The Commons invited the NAO to do a full audit of the 2009-10 expenses.

• The payments worth £800,000, which the NAO said could not be cleared because the paperwork was not available, only account for 1% of total payments. In some cases the NAO said paperwork was unavailable even though only one document was missing and alternative evidence was available.

• Although the NAO said it could not be sure that claims worth more than £10m related to parliamentary purposes, the NAO also said: "This lack of evidence does not necessarily imply that expenditure was paid incorrectly."

• The Commons has handed over control of expenses to Ipsa.

3.04pm: The Lib Dems are going to move the writ for the Oldham East and Saddleworth byelection tomorrow, a party spokesman has just told me. They want the contest to be held on Thursday 13 January. Normally the party that used to hold the seat moves the writ, but this is a convention, not a rule, and the Lib Dems say the constituency has waited long enough for an MP. If Labour opposes the move, there will be a debate and a vote.

I'm sure there is a precedent for holding a byelection campaign over Christmas, but I can't think of one. The Lib Dem candidate, Elwyn Watkins, is already well established in the constituency – he was only 103 votes behind Phil Woolas in May – and a quick campaign will boost his chances.

3.21pm: The BBC says the coalition is close to a compromise on the future of control orders. This has been a highly contentious issue, because the Lib Dems are strongly opposed to control orders, while David Cameron and Theresa May have been reluctant to dismantle controls that supposedly protect the public from terrorist suspects. But, according to Iain Watson and Laura Kuenssberg, a compromise has almost been agreed:

The Office for Security and Counter-terrorism – operating from inside the Home Office – is currently reviewing the system and the BBC understands that the basis for a compromise is now in place.

Senior Liberal Democrats are understood to be ready to accept a ban on travel for terror suspects.

Similar travel bans are applied to other potential offenders such as those suspected of planning football violence. They are also ready to accept some restrictions on use of telecommunications.

It is understood, for example, that mobile phones and computers could be used by the suspects under certain conditions.

The Lib Dems also believe that enhanced surveillance could be used rather than long curfews. Although this is more expensive, it is likely to be acceptable as so few people are subject to control orders.

The terminology would be changed and a new name given to control orders.

3.28pm: The Commons authorities are not today naming the MPs and former MPs who are being asked to repay expenses. (See 2.02pm.) "We intend to release the names at a later date once the MPs themselves have been informed and given an opportunity to comment," a Commons spokeswoman said.

3.49pm: Here's an afternoon reading list.

• Brian Wheeler at the BBC wonders whether Iain Dale's decision to give up blogging means the golden age of blogging is over.

Tim Montgomerie, one of three full time staff at ConservativeHome, says life can be tough for the one-man band blogger: "There are sometimes periods when you just need a rest."

But he believes it is far too early to start writing obituaries for the medium, saying that new blogs are starting all the time on both sides of the political spectrum, with some of the most effective new entrants, such as Political Scrapbook or 38 Degrees, coming from a leftwing perspective.

Traffic is down on the same month last year for the first time in ConservativeHome's history, he reveals, but it is impossible to say whether this is due to the growing pull of Twitter, or the vagaries of the political cycle (and it is still higher than at the same point in 2008, he adds).

I want to argue that the series is only a little bit to do with music and much, much more a form of voyeuristic exploitation. Every single contestant, from the opening public auditions to the grand final, is required to say that winning and becoming famous is the most important thing in their life. The thrill we get is not from great performances but from seeing people's hopes get shattered.

I intend to connect this to the wider celebrity culture, one which, for example, sees the bestseller lists dominated by terrible autobiographies (John Harris is very good on this today in the Guardian). And because so many celebrities are famous for being famous, the worshipping of celebrity comes at the cost of valuing other attributes like effort, skill and virtue.

• The Liberal Democrats have confirmed that they want to hold the Oldham East and Saddleworth byelection on Thursday 13 January. They are going to move the writ in the Commons tomorrow. At PMQs Labour's Chris Ruane asked: "Is this unseemly haste over the festive season a cynical attempt by the government to avoid the wrath of the public, and especially students, on tuition fees, school cuts and police cuts?" (See 3.04pm.)

• Control orders are likely to be replaced with new restrictions on terror suspects, the BBC is reporting. It says that the government is close to a compromise on the issue which will involve the name "control orders" being dropped, but a new framework being introduced that could involve, for example, a travel ban on suspects. (See 3.21pm.)

• George Osborne, the chancellor, has suggested that the 20% VAT rate will remain in place for some time. He told the Spectator: "The VAT rise is not temporary. It can't be. We are talking about a totally different scale of revenue and the VAT rise is a structural change to the tax system to deal with a structural deficit."

• The TUC has strongly criticised the government's decision to press ahead with NHS reorganisation. "Today it's clear that there will be cuts, top-down organisation and privatisation by stealth as private companies increasingly run parts of a fragmented market-based NHS," said Brendan Barber, the TUC general secretary. "Support for the NHS is built into our national DNA, and this looks like [the government's] most dangerous policy yet." The NHS Confederation, which represents NHS trusts, has also expressed reservations. "While we support the objectives of these reforms, we have to get there first. The absolute priority is to be realistic about the dangers of transition and take firm action to avert them so the reforms have a chance of success," said Nigel Edwards, the confederation's chief executive.